In a surprising turn of events, US President Donald Trump has announced that he will not use force to seize control of Greenland from its NATO ally, Denmark. This statement, made during his speech at the World Economic Forum in Davos, Switzerland, has helped to calm financial markets, with the FTSE 100 index closing slightly higher on Wednesday.
According to Kathleen Brooks, research director at XTB, Trump’s speech had two key takeaways for investors. Firstly, Trump will not take Greenland by force, and secondly, he wants the US economy to continue performing strongly, which should send US stocks higher.
The FTSE 100 index closed up 11.31 points, or 0.1%, at 10,138.09, while the FTSE 250 ended 113.42 points higher, or 0.5%, at 23,071.29. The AIM All-Share also closed up 7.45 points, or 0.9%, at 808.59.
Despite Trump’s previous threats to impose tariffs on Britain and other European countries for opposing his claims on Greenland, Prime Minister Sir Keir Starmer has made it clear that the UK will not yield to such pressure. Starmer told Parliament that he would not give in to Trump’s demands and that Britain’s principles and values regarding the future of Greenland are non-negotiable.
The UK’s inflation data also made headlines, with the Office for National Statistics (ONS) reporting that consumer price index (CPI) inflation accelerated in December, rising to 3.4% year-on-year from 3.2% in November. This was slightly higher than the consensus forecast of 3.3%.
However, analysts have downplayed the significance of this “blip,” suggesting that the December figures were influenced by factors such as the rise in tobacco duty rates and the unwinding of early Black Friday discounts. RBC Capital Markets expects the December spike to fall away sharply in the first half of 2026, while Deutsche Bank predicts that inflation will take a big step down in January, pushing closer to the Bank of England’s 2% target.
Overall, the markets have reacted positively to Trump’s more conciliatory tone on Greenland, with the FTSE 100 and other European indices closing higher on Wednesday. Investors will now be closely watching for any further developments in the ongoing negotiations between the US and Denmark over the future of the autonomous territory.
